In a scenario where PE firms are finding it tough to exit their old portfolio investments, Standard Chartered Private Equity India has exited its nascent investment in basmati processing firm Bush Foods. Qatar-based Hassad Food has invested $200 million (R1,088 crore) for the acquisition of Bush Foods, giving a three-fold return on StanChart?s two-year-old investment.
Agriculture and livestock investor Hassad Food is owned by Qatar?s sovereign wealth fund Qatar Investment Authority.
StanChart PE had picked up a minority stake in Bush Foods from Rahul Raisurana?s mid-market fund in 2011 for R110 crore.
QInvest and Ambit acted as financial advisors to Hassad Food and KPMG Corporate Finance, India was the advisor to promoters of Bush Foods.
?Food security is a big thing today. Therefore, companies are looking for opportunities globally in this sector,? says a fund manager with a foreign private equity firm on condition of anonymity.
Another buzz according to a private equity investor whose fund has invested in similar companies is that countries like Qatar have been scouting India for the past one and half year for a good partnership to tie-up and secure basmati rice resources. ?Countries like Qatar have mandated under the Islamic religion to provide Zakat (charity) to poor Muslims across the Muslim-populated regions. They had decided basmati to be given as charity and hence were scouting for deals,? he said on condition of anonymity.
There has been significant foreign investor interest in the Indian food and agricultural sector.
In 2011, basmati processing firm Kohinoor Foods formed a joint venture with US-based McCormick with the latter holding 85% stake in the JV. Last year, International Finance Corp and PE firm TVS Capital invested $25 million in Haryana-based basmati supplier Dunar Foods.
Norway-based Orkla group bought spices and ready-to-eat foods company MTR Foods for $100 million in 2007.
?Global players have been keenly looking at acquiring branded plays and ready-to-eat businesses driven by the inherent growth in these categories due to changing lifestyles and food habits, and to also get a good distribution network to push their own products,? says Mayank Rastogi, partner ? private equity and transaction advisory services at consulting firm, Ernst & Young.
?Growth of branded commodity is very predictable with the rising GDP growth rate. Hence, foreign investors will invest in such companies,? says the PE fund manager quoted previously.
According to experts, food and agri-based companies are trading at a price/equity multiple between sub 10% and 15%.